You don't lose points for college in my system. Remember, Paul says he accepts everybody who is good enough, not the top 20 teams. Whichever way you reach 13-15 on my scale, you're likely to get an interview. We'll have to see.
"And yet Y Combinator showed us we were still overestimating people who'd been to elite colleges."
Paul "still overestimates" such students, so they're more likely to get an interview. And since he used the word "still", it means he feels he's still biased at this present time. How do you think these test cases came about, anyway?
"college = 0"
I doubt that this can ever be true. Paul still asks for the students' colleges. In other words, he's still figuring this out. What he means is, nobody needs to have a degree or a good college to create a successful startup. That is true. But I do think there are good signs about a person that uniquely pre-qualify them if the student is from a good college:
1) The fact that the school accepted them, matters least (like Paul says in the quote above.)
2) However, I do think Paul considers it a sign of dedication if a student from MIT wants to leave or delay entry in favor of YC, or if they've recently graduated from Harvard or Stanford and instead of proceeding to graduate school or possibly a six-figure job, to spend a couple of years living on ramen noodles.
3) Regardless of what Paul thinks, VC's probably love that stuff, if the startup doesn't have lots of traction yet.
The big VC investments seems to go to those from elite schools:
MIT (no product when selected by YC, 4m VC before product was finalized), Cambridge (no product when selected by YC, 400k VC), Yale (no product when selected by YC, unknown VC money), Stanford (likely no product when selected by YC, Sequoia Capital VC).
4) I suggested good colleges would get +2, not just elite colleges.